Month: August 2017

I’ve now been plugging money into my Go T’ Pub ISA for the last 4 months and, naturally, I start looking to the future as I see month on month growth in the value of it. One of the thing I enjoy about reading blogs is seeing people progress towards FI.

So, if my target retirement date in 2025 is to happen, what might the Go T’ Pub ISA look like? Will I be in a swanky pub or wine bar every day or will I be having an occasional water only? One thing I do seem to have missed somewhere is what people think their end goal will be or how they are going to get there in detail. Sure there is the “I need to get £X,000 to do it” but I’ve not seen many forecasting it (feel free to point me in the direction of where there is!). RIT had a very good graph showing his progress going up, but nothing that included a forecast line.

Given that, I wanted to share my thoughts now that the GTP ISA is up and running and to look at how I see it panning out. If I am really honest, this is a totally pointless exercise 🙂 The money isn’t going into a savings account and who knows what the markets will do… but I know it will be interesting to look back over the years and see how it pans out, and this is a way of recording what I thought would happen. Again, I know I am putting in more per month than a lot of people will be able to do but this only means it may take a bit longer. The aim is to show how it pans out against how I thought it would. The forecast date I am taking this to is June 2025, and I am going to enjoy looking back at my spreadsheet to see how it is tracking.

So the first port of call is the standard calculator to see what a regular drip feed would look like into a regular savings account paying out.

So, from the basic approach, how does this look?

2% return – £114,414

4% return (my standard assumption) – £124,210

7% return – £141,018

10% return – £160,799

12% return – £175,920

So, worst case it is still going to be over £114k. So hopefully around the £350 – £400 per month by 2025 being generated. A long way from providing for FIRE, but a good healthy social budget.

Now, that is a bog standard savings rate, which of course isn’t going to apply with the money going into the markets. So, time to have some spreadsheet fun!

So firstly, lets state some of the basic assumptions that are being made here to give some of the baseline numbers.

Although the prices may go up over time, I am assuming I will buy 18 VWRL each month

I have incorporated the additional VWRL I bought in July

To start, I will take the base that I will not be reinvesting dividends – as this is supposed to be paying for my social life (although I suspect I will aim to reinvest)

It runs from when I started this in 2017 through to June 2025

I am ignoring inflation, or price increases on the grounds that I will adhere to assumption #1

So – what does that mean as a baseline?

18 units a month, and no dividends reinvested, I will get to June 2025 with 1,765 VWRLs – at current dividend rate of £1.20 per year (handily 10p a month!) that will give me an annual income of £2,118 – or £176.50 per month. Not brilliant, but not too bad income without having to do anything at all I guess – not a retirement amount but not to be sniffed at either.

So what happens if I were to not use the dividends to buy a pint or two, but reinvested them? Well, last year VRWL paid £1.20 per unit over the year, or 30p on average per quarter (I am going with 30p average for ease). What happens then?

Well, again I am just using the earned dividends and not adding any extra cash (which I reserve the right to!). Well, that means on June 2025 I would have 1,895 VWRL. 130 extra units just by not taking any money out, how cool is that? Well, again going on £1.20 per year income, that would give an annual income of £2,274 – or £189.50 per month. An extra £13 per month just for not taking the cash out.

Now, what if I were to try and not only reinvest the dividends, but also squeeze an extra unit each month – so transferring in an extra 50 or so quid at the end of each month? That would mean I would buy 19 a month from now on instead of 18.

This 1 extra unit per month compounds to 1,997 units. That would give an income of £2,396.4 or £199.70 per month. I have to say I would love to make it over the £200 per month if I can by 2025 – in effect needing £600 per quarter – which would require 2,000 units.

What I find strange is that this is lower than the £350 – £400 I predicted above. I guess that is reflected by the fact that VWRL is currently generating about 3% income not the 4% I used in the calculation above. Either way, this pointless exercise is going to be interesting to see how things pan out!

Out of interest I decided to look at the “best case” scenario as well. That means using the full £20,000 per year (assuming it doesn’t increase) and see what that looks like. Well, that’s 27 units per month, or with the dividends reinvested 2,810 VWRLs – which would generate £281 per month. Ah I can but dream!

So – I think I will set my initial goal at hitting 2,000 units – which means I need to buy an extra 235 units over the coming years (roughly 30 a year extra). That’s a tall order, no two ways about it. The best time to add the extra units is as early as possible so I need to knuckle down hard and try to squeeze as much extra cash out as possible – the sooner I earn enough in dividends to buy an extra unit the better. Let us see….

I will look forward to revisiting this post over the years and see how I do!

How much detail do you go into when planning into the future? Do you breakdown by month or just aim for a rough end game?

So after my disaster with the garden furniture, why would I do DIY again? I will repeat just how much I despise DIY, and unlike TFS I am really not interested in learning those sort of skills as I know I would rather have a larger nest egg and pay someone else to do it!

The case for DIY.

So, when I went to close one of the blinds the other night something went wrong. As I was lowering the blind, all of a sudden the one side started going up again. I tried reversing the pull again but no joy – seems something in the mechanism was broken.

There was nothing for it. I left it as it was and went to bed! 🙂

The following day, I played through the options in my mind.

Pay someone to come and look at it and fix it. I have absolutely no idea how much this would cost, but I bet it would be over £100. I’d have to be around for them and it would be on their timescales.

Try and fix it myself. I don’t have the skills to do this, but I played through the two possible outcomes.

I manage to fix it and it works again

I dont manage to fix it and I have to resort to option 1 above

So, the worst case was I would have to pay someone anyway, I decided to have a go. I moved everything out of the way so that I could take the blind down (the easy part). Holding an approximately 5 foot wide blind in one hand whilst trying to work the mechanism in the other is not easy! Having managed that, I was able to work out which section of the mechanism was not working properly.

To cut a long story short (I know, too late) – I ended up taking the mechanism apart and untangling the knots in the string and putting it back together. I guess it probably took about 45 minutes in total – result! I reassembled the mechanism and went to test it before I put the blind back up.

F@*k. I had managed to reassemble the last two rollers the wrong way, so whenever I tried to pull the blind some went one way, others went the other way! I knew there was a reason I didn’t like DIY! Back to square one – the mechanism was taken back apart, the two rollers were turned around and the mechanism put back together. Surprisingly fiddly it turns out this DIY lark.

So, second attempt to test it.

It worked! So, feeling very smug with myself I managed to get the blind back locked up over the window and everything put back. I am happy to report that now, a week later, it is still working! I am really quite pleased with myself for fixing it – and overall it probably took about an hour – it just felt a lot longer!

The case for not DIY.

We needed some things doing in one of the rooms in our home. The size and scale of it all meant there was absolutely no way I was even going to consider doing this myself!

Now the electricals, cutting holes in walls and ceilings and replastering back up is something I would not even enter into trying to do myself. I am sure some people would love to try it and learn new skills, but for me no thank you!

The other part was some fairly major work in the room itself. Now if I had a woodshed, worktable, carpentry “stuff” (saw and the rest – no idea what else you need) then yes, I expect there is an outside chance that I could do it myself, however there are two main reasons why I chose not:

I hate DIY. I know I would resent every moment of measuring, chopping / sawing, sanding etc. that I had to do – and given my hatred I know I would make a mess of it so it would also look pretty cr@p and, with my skills, likely fall apart in about a year anyway

Time. I would only really be able to work on this at the weekends and I suspect even with every weekend between now and Christmas I wouldn’t be able to get it done in time

So, with everything considered, it was decided. We would get someone to do it for us! We had a couple of people come round to give suggestions and quotes. We ended up choosing one of them, and they have done all the measurements, and the design is complete. Yes it is going to be more than it would have cost me to buy all the equipment and the bits, but I am fairly certain it will look a lot better! Total time to do the entire room? 3 days on site. Ok add in a day to move everything out before, and a day to put everything back, but even still that is WAY faster than I could have done it – and I wouldn’t have dared touch the electrics.

So, they are preparing the stuff, and come October they will do the entire installation for us – I can’t wait. It does however mean a big dent on the savings rate however the funds will come from cash reserves (something you shouldn’t do) and we will rebuild them over time so I will continue to put money into the markets – using the income generated to help refill the cash buffers.

Conclusion.

So, what is my take away from all this? Ignore DIY and go to the pub! After a recent visit to the pub I “accidentally” popped into the local majestic to grab a few more beers.

What do you know – I found out that they sell off the beer stock as it’s getting close to its sell by date. I got the below case for £10. Not at all bad – and let’s face it – the competition they were part of finished in Feb ’17 – so I don’t think that they will magically go off on the night of the 31st August – but I guess I could drink them all to be safe!

Firstly apologies for the lack of posts over the last week and a bit – work has been keeping me rather busy, and some social things as well mean I have basically only been at home to sleep!

One thing that never ceases to amaze me is the number of people who use Sky / Cable of some form or another. You hear a lot on both sides of the Pond about “Cutting the Cable” and the financial benefits of doing it. I have a more simplistic view. There is so much cr@p on TV these days, why would I pay even more money to get even more cr@p?! Ok, we still have the TV, DVD (and assorted DVDs), and the Freeview recorder.

The recorder is great for recording things (you don’t say!) for when we want to watch it (and also therefore being able to fast forward through the adverts which means less temptations). We currently have absolutely bucket loads of stuff recorded. I could take a full two weeks off and do nothing but watch TV all day every day and I would still not get through it all. Don’t worry, I won’t be wasting two weeks of leave doing that!

I also have a problem with the business model (which to be fair was beautifully implemented) of Cable / Sky – spend a fortune buying up the rights to programmes / sports, and then charge people extra to watch it. To add insult to injury they then also throw adverts at you! Now I am not a football fan, but if someone is passionate about it then I guess I can see why they would want to pay for it, but still, its a huge expense.

I suspect it is cheaper than going to each game (given season ticket prices I did a quick bit of research on). According to Sky.com their package is reduced to £33.75 per month, then returning up to £47.50 after the fixed period expires. I did use their calculator to find a bundle for me – no football… £100 per month! £100 per month, just for TV to fill my limited spare time with more rubbish….. insane!

Don’t get me wrong – I was tempted to get Sky when the Formula 1 went over, but I didn’t. You know what, it hasn’t made a bit of difference to my life. I thought about it when the Cricket went over, but didn’t. Again, it has not made any difference to me overall. I thought about Amazon Prime when they took over Top Gear and rebranded it as The Grand Tour. Don’t get me wrong I would love to see it, but I am not paying for it!

We all have a limited time on this planet, and whilst I do think there is a place for some films or TV, it is all in proportion. After a long day or week, there is something nice to chill out in front of the box for an hour, or read the paper or a book. I have never got into any real series and yet I hear about people going through the entire Game of Thrones boxsets – just so they can catch up? From a time / cost perspective it isn’t bad value compared to say sitting in a restaurant for one evening and blowing over £100.

Look deeper inside you – not more time at the television. What makes you happy? I’d rather talk rubbish with my friends and family, travel, go walking or cycling. Even better of course would be skiing and scuba diving (not at the same time!) – but those aren’t cheap activities and not easy to do after work in London.

I do wonder if people take comfort from the noise of the TV as much as anything else, although on my no TV days I really enjoy the quiet. I always thought I would miss some of the sports, or films, but I just don’t need it, and haven’t noticed any difference.

Granted some people want to watch the latest thing immediately – but why? What’s the big deal? Just wait and it will be free – build up a large enough selection of programmes and films on your Freeview recorder, with no time limit on it, and you can watch what you want when you want for the cost of the box!

So, what activities will I be doing this afternoon after writing this? I will be having a(nother) nice glass of wine…. and watching TV! I justify it to myself as I was awake at 6am this morning, and since then I have done numerous chores around the house and some (grocery!) shopping. After a fairly heavy August I am actually going to enjoy doing stuff all now for the afternoon, knowing that tomorrow will be a busy morning again!

For the full details over all of the portfolios as a summary please refer to the full month end report – this is specifically looking at what has happened on the Go T’ Pub portfolio only.

So the key bullet points for this month:

New Funds added. This month I added £1,120 in new funds (more details below)

VWRL paid out this month woohoo! My very first dividend! A whole £7.61! Depending on the bar, that is a pint or two, or 3 bottles of Spankers IPA and some left over 🙂

No withdrawal was made.

Left over cash after purchase this month was £17.92

Overall performance: The starting value was £7,267.67, with £1,120 in new funds added, and £0 withdrawals, meaning total starting value was £8,387.67. We finished the month on £8,448.30, so the total performance across the whole portfolio was 0.72%.

VWRL ETF

So this month, with the dividends and left over cash from last month, I realised I was only just shy of being able to buy 19 rather than 18 VWRL, so I added in an extra £20 which meant I was able to purchase 1 more share. Why do that? Well, £20 isn’t a huge amount of money in the scheme of things (another reason my Cash Flow Fund isn’t going up), and these early days are really important. 1 more share now will make a good difference over the years. Given the cash left over, I didn’t need to add a full £20, however I wanted to make certain I would get that extra 1 share.

As for receiving my first dividend, this was super exciting (yes, I know, I need to get out more!). Whilst you won’t be able to retire on £7.61 per quarter, that is still £2.50 per month for the next 3 months, and it represents the very first step to the future.

The average price paid for the ETF now stands at £60.20 – and the value has increased from last month.

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There really isn’t much in it right now, but the contributions are still a little higher than the stock value but it’s getting close.

Cash vs. Investment Trust

So for me this was the more interesting part of the overall approach – I transferred 50% of my last remaining cash ISA over to an IT and will be tracking the two together to see how things perform.

Slowly but steadily over the coming months and years we will see how the difference is, but please do remember, do NOT invest your emergency fund in the stock market!!!

Cash

Now stands at £5,126.98

S&S ISA IT

Now stands at £5,125.98

Talk about a close run thing! I do know that there is one little bonus due in the pipeline, and that is the IT dividend which is due to pay out 4.3p per share at the end of August which, when reinvested, should see a good step up in the difference between the two.

Or in pretty pictures:

Pretty even again!

Remember folks, do NOT transfer your emergency funds into stocks – you need some emergency funds.

So all told, these early days of starting out really are boring, and not difficult to see why people get put off so fast. Putting aside all that money for so little perceived return.

So, as I am sitting here with a nice glass (maybe a bottle over the course of the afternoon?!) of wine, enjoying a break from the rain, I am able to take stock of life in general. Needless to say this is another random post of inane gibberish!

Right now I have a lot going through my mind as I look towards my target retirement date – in particular as I look at it I still do not think it is possible. I’ve been playing around with Networthify to see how things look. I really can’t see how it will happen, however if you had asked me 5 years ago if I would be getting the income I am now from my investments I would have laughed, so who knows!

For anyone thinking of FIRE – the biggest and most important thing you can do, is start.

As it stands, according to my average expenses and savings into ISAs, it is telling me that I have probably 16 or 17 years still to go. Well, I won’t as I will be able to get at my pension savings before then which will (pretty much… nothing is certain!) guarantee my retirement. Not early, certainly not as young as RIT or some of the others out there, but still before the state pension age.

Granted we could sell up our London pad and move out to the country to free up some cash to build up some income before then. If we did this I am fairly certain we could retire by 2025 if not sooner, but the question is do we want to? That’s a chat for another day 🙂

Today’s randomness comes thanks to the wonderful people at HMRC. Whilst I accept that my tax affairs are not the most straight forward, they really aren’t that complex. Last year I received I think it was 6 different tax codes over the course of the year. We really do need to find a more efficient tax approach, but I will save that for another post as well!

I thought this year that things would settle down with HMRC. I pad my tax bill back at the beginning of the year and then threw my bonus into my pension. I got my new tax code. Seriously? I completed my tax return in June, and received my refund from my pensions contributions. All seemed straight forward, I knew what my new monthly income was and I could start hammering the savings.

Yesterday I had another letter from them. My heart always drops when I see the brown envelope with HMRC on the back, so with some trepidation I opened it. Low and behold, I have been given yet another tax code. I am certainly not going to complain at this one as it increases my tax free allowance (most likely from putting my bonus into my pension). Surely when I submitted my tax return and they sent me my refund that should have balanced things out?

I have to admit I am perplexed. If I add up the bonus, the tax refund and the tax bonus when the money went into the pension I thought I should have had a bigger refund than I did, but I have long since ceased to try and calculate the exact amount, it seemed close enough with NI contributions.

I won’t know what difference this new tax code will make on my monthly take home, although I did use a salary calculator to try and work out the difference. I should get more cash at the end of each month that’s for certain. Needless to say, I will see what the difference is in my August pay cheque, and from September the extra cash will go into my other half’s ISA.

The result? I have absolutely no idea! All I do know is that it means that the combined ISA savings will be growing faster than I had planned, and so maybe that will knock a few months off the savings journey.

Whilst I try and play around with calculations, I know in effect it is all pretty meaningless and what will be will be. That doesn’t stop me wondering – over the last couple of years the savings have gone up faster than I thought.

Will I be able to stop work in 2025? Will I need to work beyond then, I have no idea. For now, I will continue to chuck as much as I can into tax efficient vehicles as I can, and rely on the savings to get me there….

So the month has ended, and so its time to take stock of the performance across my portfolio, and compare it to the usual index of choice. This enables me to see how I am doing. As I covered in my “How I measure my returns” – basically I take the value of the portfolio at the end of last month, add on any contributions for the month, and that was my starting value. End value is the value at the end of the reporting period. Simples 🙂

So, what did July look like?

Portfolio

Performance

Notes

Company Pension

-0.14%

No income generated as all funds are in growth or reinvested

Personal Pension

-1.34%

No income generated as all funds are in growth or reinvested

ISA 1

0.69%

No income generated as all funds are in growth or reinvested

ISA 2

0.17%

The performance does not include the income that was paid out into my account, but is covered by the income so really need to consider both in conjunction

ISA 3

1.06%

Although dividends are paid out, they remain in the ISA wrapper, and will get reinvested for growth. The performance figure includes both the Capital growth, and also income received which will get reinvested. The Income is the %age paid out by the portfolio but remains inside the wrapper to buy more goodies

ISA 4

1.15%

Go T’ Pub ISA

FTSE-100

1.89%

This excludes any dividends

FTSE-250

0.95%

This excludes any dividends

FTSE-All

1.68%

This excludes any dividends

S&P500

0.02%

This excludes any dividends

Dow Jones

0.61%

This excludes any dividends

VWRL

1.51%

This also threw off a dividend of 0.7% on top of the growth

VHYL

1.58%

This also threw off a dividend of 1.16% on top of the growth

GBP/USD

1.40%

This was taken on the spot rate on the close of the last day of the month. Going forwards I will pick up the exchange rate from www.xe.com for consistency and real life 🙂

So, what to make of all this? All round, I think a pretty miserable month. Markets went higher by more than my investments.

My personal ISA had quite a bit of expenses this month in terms of trading costs and yet still surprisingly positive – I will be intrigued to see how much impact on my returns the switch into larger passive funds will be.

I am disappointed with my two pensions, however my Company Pension is still in the early days and, having been going for only a relatively short time, the contributions tend to make a large impact on the performance. Still for something I don’t even need to think about it is still growing relatively quickly!

Despite all that, in real monetary terms, my retirement pot still increased by almost 3% overall so I am not going to complain too loudly. At the start of this tax year I decided to have a little bit of fun with excel (I know how to live, right?!) and decided to take a view of, had I thrown £10,000 into each of my investment vehicles, what would that look like over time. Now, we are only 4 months in so it is really too early to tell, but I will certainly keep an eye on it, for those of you who like pretty colours and excel graphs, here it is:

Surprisingly, the best place to have parked your £10k, by over £200, was the pension with my IFA!! Even more surprising in second place was my ISA with my IFA.

This was certainly not what I was expecting especially when you read about all of the costs etc. associated with active funds, but there you go. However, this is also only 4 months of data – and to have a realistic view this really needs to be done over at least 5 years.

All things considered, the slow but steady rise to get to FI continues – although I am still not yet on track to hit my target retirement date. Since I started tracking my retirement forecast date (May ’16), I have brought forward the expected date to hit my number by a staggering 18 months. If that continues then by 2020 I should be on track, although that does still leave me the challenge that a lot of funds will be stuck in pensions I can’t access.

So, how was your July?

Notes:

Company Pension: This consists of a number of actively managed funds – I don’t have any choice of trackers etc, but I will take the matching, that will more than cover the fees, and I will just live with it.

Personal Pension: This is managed by my FA and contains Actively Managed funds. I continue to contribute each month and the contribution is included in the performance – before my FA has taken their cut (e.g. if I put in £100, and they charged me £5, so only £95 went into the account, I would still class that as £100).

ISA 1: This is also managed by my FA, but no new contributions going in (nor planned).

ISA 2: This is also managed by my FA, however its slightly more complicated than that. There are 3 sub portfolios within, each of which have funds added each month, but each portfolio has different levels of contribution.

ISA 3: This is the ISA I manage myself. The last contributions added to it will be this tax year, 2016 – 2017 until some of my other ISAs have grown to a similar size

ISA 4: This is the Go T’ Pub ISA that is being held for now for reference, but will start from the new tax year in 2017 – 2018

So, having just sold down some of my holdings of companies, I find myself with some cash sitting in my ISA. This gives me the opportunity to continue rebalancing my portfolio to my newer target allocations.

At present, I am heavily under weight on trackers (in an attempt to reduce the overall risk of my portfolio) so with all this cash I need to purchase some trackers. Now given that I have seen the change in my mentality when I am using trackers, I know that I have to get back in as soon as possible and make sure I hit the next quarters payout – who cares if the price fluctuates up and down a bit.

So, before I dive into what I bought, a quick reflection on what has happened since I sold the stocks. Well not surprisingly, they have gone up slightly. I do find this slightly hard, and wishing that maybe I had just hung on, and who knows what will happen in the future. Yes, I will keep an eye on some of them to see if I can make the most of a cyclic opportunity. For now, I keep reminding myself that I did this to stabilise my portfolio, so in effect the trackers will be fire and forget.

The allocations are not equal but do have predefined target allocations that I can start tracking against.

Purchase #1: Vanguard FTSE-250 – VMID.

Erm hang on a minute? Didn’t I just sell a FTSE-250 tracker?! Well yes. Thanks to a great article over on Monevator, I thought to check on the fees. My old tracker, MIDD, was charging 0.4%, compared to the Vanguard offering at 0.1%. Given the difference in costs, I changed to take Vanguard, and accepting that Vanguard are forming a larger and larger part of my trackers, which is a little worrying but hey ho!

Average purchase cost: £31.68

Purchase #2: Vanguard Asia ex. Japan – VAPX.

Although I have exposure to Japan with my Investment Trust, I have very limited Asia exposure, and so I have tucked in to some Asian holdings. No doubt I will forget about the holding until I need to start topping up the holdings over time but for now it gives me a little diversity!

Average purchase cost: £19.95

Purchase #3: Vanguard European ex. UK – VERX.

Be it a desire to derisk Brexit, or just a desire to increase non UK holding (I find that VHYL is quite heavily US based) or give me some other random exposure, who will ever know 🙂 I wanted to explore some of the wider markets, especially as it means I can now remove my watch list European shares and not care about the exchange rate against the individual shares. I buy a slug of the shares and forget about it – bliss!

Average purchase cost: £25.99

What next?

So I still have some cash left over but I will leave that as cash for now. What I want to see is just how much dividends come in from these new holdings – another couple of months and see how that holds up before I purchase anything further. I have as always done my “back of fag packet” calculations but there is nothing quite like seeing the real dividends drip in.

The portfolio is finally getting close to my allocation – in fact according to my rules, the next purchase will, subject to market changes, be Investment Trusts to build that portion of the portfolio up.

With any luck over the course of this year the rebalancing will complete, and allow me to get back to trying to time the market (remember folks, don’t do that!).